As federal regulators work to overhaul merger and acquisition enforcement, hospitals say the industry’s guidelines “do not need major revisions” outside of two new measures related to the potential benefits of hospital consolidation.
In a March 30 letter to the Department of Justice (DOJ) and the Federal Trade Commission (FTC), the American Hospital Association (AHA) reinforced its merger-friendly position by referring the agencies to recent data on the positive outcomes of provider consolidation.
These reports and studies—some of which were conducted on behalf of the trade group—suggest efficiencies enabled by mergers allow hospitals to reduce costs, improve quality, better coordinate services or improve access by helping struggling facilities keep their doors open.
“For these reasons, it is essential that the antitrust agencies employ analytically sound merger guidelines that fairly account for the lifesaving benefits that hospital mergers produce,” AHA General Counsel Melinda R. Hatton wrote in the letter. “Changes to the guidelines should reflect years of scholarship that have documented these pro-competitive efficiencies.”
The FTC and the DOJ began soliciting public input on merger enforcement in January in the wake of “an ongoing merger surge that has more than doubled merger filings from 2020 to 2021.” The agencies received their directive last summer from President Joe Biden, who specifically called out hospital dealmaking as a driver of higher prices and consumer harm.
The AHA wrote in its letter that hospitals and other parties “rely on the merger guidelines for predictability and transparency of what constitutes lawful conduct” and that recalibration should only be considered for “significant developments in antitrust law and economics.”
Rather, AHA sought to redirect the regulators’ focus by advising the DOJ and the FTC to use the recently passed Competitive Health Insurance Reform Act (CHIRA) to “investigate and challenge anticompetitive mergers and deceptive conduct by insurance companies.”
Insurers, the provider group wrote, already operate highly concentrated markets permitting them to raise prices, restrict competition and limit patient choices. The AHA also referenced insurers’ “bait-and-switch tactics” to unexpectedly change coverage and restrictions on specialty drugs as harmful results of an under scrutinized slice of the healthcare industry.
“The current guidelines allow the agencies to challenge deals like UnitedHealth Group's proposed acquisition of Change Healthcare, a suit that was recently and rightfully brought by the DOJ,” the AHA wrote. “The AHA strongly urges the agencies to investigate and pursue these anticompetitive practices by health insurers using the powers granted to them by the passage of CHIRA.”
Still, the AHA’s letter did outline two hospital-specific guideline revisions for the agencies to consider.
The group first suggested that agencies “correct defects in the economic models they use to evaluate hospital transactions.”
For instance, a demand model FTC uses to predict how many patients view merging hospitals as their top two choices “overemphasize how much value patients assign to travel times and ignore other important considerations that affect how consumers select a hospital, such as past treatment experiences, where patients' physicians have admitting privileges and physician referrals,” AHA wrote.
The trade group also asked regulators to update their guidelines to recognize care coordination improvements enabled by hospital mergers.
“Economic research has shown that partnering with hospital systems typically enables the acquired hospital to provide measurable benefits to patients in the form of lower health care costs, improved patient care and better access to providers,” the AHA wrote. “The agencies and the guidelines should recognize these additional benefits to hospital mergers.”
The AHA’s support for hospital consolidation grapples with numerous studies published over the last several years suggesting that healthcare providers’ increased market power drives higher charges, service line cuts and fewer incentives to improve care.